A conventional, or Fixed-Rate Mortgage (FRM) is a loan where the interest rate is locked for the entire term. This opposed to an adjusted rate mortgage (ARM) where the rate may vary for the life of the loan.

Conventional mortgages protect borrowers from the risk of rising interest rates. However, if interest rates decrease, FRM borrowers may pay more than the market rate unless they refinance later.

Borrowers may prefer a fixed-rate loan where monthly payments are predetermined, easy to comprehend and fixed for the life of the loan. But FRMs do tend to charge a higher current rate than the same variable rate mortgage.